Let’s talk about something deeply important for your business’s health (and your sanity): separating business and personal finances. It might not sound like the most glamorous topic, but nailing this will set you up for major success. Think of it as finessing your finances into a masterpiece.
Why Separating Business and Personal Finances Matters (Much More Than We’re Told):
You’re crushing it in business, but your personal bank account is a bit of a mystery. Or worse, you’re not entirely sure what your business profits are, because your income and expenses are completely mixed in with your everyday life expenses. This is so common—hello you, the woman who multitasks and manages everything! BUT not having a clear separation between business and personal finances creates unnecessary stress and holds you back from reaching your high-level dreams.
Separating your business and personal finances isn’t just good practice; it’s essential for:
- Clarity: See exactly where your business money is flowing. No more guessing games—get pure, unadulterated financial insight.
- Tax Time Sanity: Say goodbye to the stress of scrambling for receipts and trying to decipher what’s business and what’s not. Distinct business finances mean less stress and more time for…well, literally anything other than tax prep.
- Legal Protection: Forbes agrees that entrepreneurs can face greater financial and legal issues without separate bank accounts. In the (hopefully unlikely) event of a legal issue or the big “A” from the IRS, your personal assets are better protected. We’re about securing your future, darling.
- Funding Opportunities: Investors and lenders want to see organized, transparent financials. Separation shows you’re a serious player—someone who knows how to handle their business. It’s a power move.
- Peace of Mind: Never having to ask the question, “Where did all my income go?” Priceless. It allows you to focus spending on smart things and growing your empire with confidence.
Be a Pro at Self-Employed Finances
So, how can you actually be a pro at managing your self-employed finances? Follow these actionable steps:
Open a Business Bank Account
This is the first step. No more mixing funds! Choose a bank that offers business-friendly features. Be sure to inquire about all monthly account fees and what actions you can to take to avoid such fees (e.g. keeping your account balance above a certain amount). Think of it as your business’s official finance headquarters.
Consider Getting a Business Credit Card
Keep business expenses separate and start building business credit. Hello, future funding! This is about building a strong financial foundation for your business. Be sure to carefully research any annual fees (we refuse to pay more than $150/year) and make sure the rewards are easy to use and relevant to your life (e.g. if you don’t t travel much, don’t get a travel card that will reward you airline miles you won’t use).
Separate Your Books
For your business books, we recommend using an accounting software for your business books like QuickBooks, Wave or Xero to track every penny. It’s the best investment in your business and it will make your life so much easier.
**If you’ve been thinking about signing up for Quickbooks, Gutsy Money can give you a discounted rate for a year (way better than the 3-month discount you’ll get on the QB site). You don’t even have to be a Gutsy Money client. Email us for a discount link!**
For your personal books, consider a budget-tracking software like Mint or Monarch. Research to see which one fits best with what you need and want.
Pay Yourself a Salary
Set a regular owner’s draw from your business to your personal account to pay yourself. You’ll want to track it correctly in your accounting software (have your bookkeeper set this up or schedule a Systems Review with us to make sure you’re doing this the right way for your business schedule). It’s KEY for you to feel taken care of and empowered, but this also establishes a pay structure if you need to apply for credit or a loan in your personal life. You have this business so you can help people AND live. It will provide consistency and help with your personal budgeting, too. Treat yourself like the CEO you are.
Regularly Review Your Financials
Don’t just set it and forget it. Schedule time each month (preferably, each week) to review your income, expenses, and cash flow. Get fierce about being in control and making informed decisions.
Need Help With Your Business Finances?
Feeling a little overwhelmed? We get it! That’s where our Bookkeeping and Accounting Diagnostics service comes in. Our senior bookkeepers will dive into your finances, help you create a personalized financial roadmap, and set you up for success. It will leave you feeling confident and ready to conquer your finances. Book a free consult call here.
The Bottom Line
Separating your business and personal finances is a non-negotiable for women entrepreneurs. It’s a power move that sets you up for clarity, protection, and ultimate success. Ditch the financial chaos and embrace the organized, confident boss you were born to be! You’ve got this.
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